ECONOMICS
TECHNOLOGY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Transaction, Precautionary and Speculative motive.
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Transaction, investment and Speculative motive.
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Transaction, saving and Speculative motive.
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None of the above
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Detailed explanation-1: -In his “General Theory of Employment, Interest and Money” (Keynes 1936), Keynes distinguishes between three reasons for holding money: the transaction motive, the precautionary motive, and the speculative motive.
Detailed explanation-2: -The three main motives for which money is needed or demanded by people are Transaction Motive, Precautionary Motive, and Speculative Motive.
Detailed explanation-3: -The speculative motive for demand for money arises when investing the money in some asset or bond is considered riskier than simply holding the money. The speculative motive for demand for money is also affected by the expected rise or fall of the future interest rates and inflation of the economy.
Detailed explanation-4: -Thus the Keynesian theory of money demand, like his predecessors’, is a theory of demand for real money. The major implication of the Keynesian analysis is that when the interest rate is very low, everyone in the economy will expect it to increase in the future, and hence, prefers to hold money whatever is supplied.